Discuss the below:
1 It appears that the Teamsters efforts to prevent Mexican trucking firms from performing more transportation and shipping work backfired. I agree that Mexican trucking firms, their drivers, and trucks need to meet regulations and established safety requirements. Those provisions should always be required within any trade agreement regardless of the form of transportation being used. Just because it is a trade agreement, it should not disregard safety requirements and regulations that we will (should be) hold(ing) our own companies to maintaining. Completing, passing, and receiving higher safety ratings than U.S. transportation firms only improves the reputation of the Mexican firms, which will ultimately land Mexican firms more contracts and work.
I believe the benefits in this scenario though seem fairly clear. Ultimately, Mexican firms will benefit for the time being, or at least until U.S. firms find better pricing strategies to compete with the Mexican firms. Greater competition from Mexican trucking companies benefits the Mexican transportation companies. Mexican trucking firms will gain opportunities to win contracts to perform shipping from Mexico to the U.S. U.S. shipping and transportation firms in comparison are probably more expensive. Mexican firms will now have the freedom to underbid U.S. firms for shipping contracts from point of departure to destination instead of having to unload at the border. This creates a degree of efficiency for Mexican trucking firms in that they are now able to provide a service that is actually a longer production run. It is argued that greater competition from Mexican trucking firms would lower the price of road transportation within NAFTA (Hill, 2013, p. 312). Longer production runs decrease the impacts of fixed costs. Though variable costs will increase, the Mexican firms will also be able to earn more per production run. Eliminating the requirements to unload and reload trucks on to American trucks at the border benefits Mexican trucking firms because their trucks can save travel time costs and charge U.S. firms for the full value of transporting goods to their final destinations.
U.S. truck drivers that belong to the unions, and private non-union trucking firms, lose out because they are having to compete with a lower cost competitor, they will risk losing jobs due to the greater freedoms provided to the Mexican trucking firms.
The implementation and use of Mexican trucking firms benefits the manufacturing/producing businesses in the U.S. because they are able to ship goods to the U.S., and back to Mexico, at a lower cost. Ideally, these manufacturers will pass these cost reductions along to U.S. consumers in the form of lower prices. Much depends on the profit making motives of the U.S. companies taking advantage of Mexican trucking firms.
Other cascading effects may potentially occur. U.S. businesses are continuously trying to find ways to cut operational costs. Associated with costs of trucking and logistics may be the increased reliance and or movement of manufacturing goods and resources within Mexico. While this likely already occurs, reducing the length of the supply chain of U.S. companies by moving operations closer to resources and manufacturing goods in Mexico may become a reality for U.S. companies trying to save money on operations. Such decisions will further benefit the Mexican economy. If manufacturing is moved to Mexico, the manufacturer may also choose to utilize the resources that can be found or are available in Mexico. U.S. companies that choose this course of action will reap the benefits of advantages gained by the improvements being put in place via our NAFTA agreement. There are many ways this scenario can play out depending on the operational environment of U.S businesses, but ultimately I see Mexico benefiting as long as their trucking firms can out U.S. trucking firms and unions.
Hill, C. (2013). International business: Competing in the global marketplace. (9th ed.). New York, NY: Irwin/McGraw-Hill.
SHAWN COLLINS
2 The agreement opened the door for open trade, ending tariffs on various goods and services, and implementing equality between Canada, USA, and Mexico. According to NAFTA (2013) "all non-tariff barriers to agricultural trade between the United States and Mexico were eliminated. In addition, many tariffs were eliminated immediately, with others being phased out over periods of 5 to 15 years" (para. 2). Under the terms of North American Free Trade Agreement (NAFTA), the border between the United States and Mexico was to be opened to US, Canadian, and Mexican trucking on December 17, 1995. US fears of population from Mexican trucks which release a high degree of emissions and carry hazardous cargo. Yet, the Pilot program allowing 100 Mexican transportation companies in the US which it showed Mexican trucks to be safe. However, congress killed the program which led to tariffs. In 2001, the NAFTA resolution panel unanimously supported Mexico's position by determining that the blanket refusal of the United States to process applications of Mexican truckers for entry into the United States was in violation of its NAFTA obligations.
There are potential economic benefits of the trucking provisions in the NAFTA treaty. First of all, there are substantially decrease transportation costs between NAFTA countries. The need for storage and warehousing was to decline. Furthermore, the reduction in short-haul truckers would cut costs to shippers. Finally, the economic efficiencies created by free trade in goods and services were meant to yield efficiencies in cross-border transportation of these products.
There are impacts of NAFTA. At start, it rather than produce U.S. trade surpluses with Canada and Mexico, NAFTA has caused years of massive U.S. trade deficits. Next, NAFTA caused the outsourcing of manufacturing jobs from the U.S. to Mexico which led to the massive trade deficit that the U.S. has with Mexico, and that through the outsourcing of manufacturing job, wages have been reduced for the Americans.
References
Hill, C. (2013). International business: Competing in the global marketplace. (9th ed.). New York, NY: Irwin/McGraw-Hill.
North American Free Trade Agreement (NAFTA) (2013). USDA.gov. Retrieved from https://www.fas.usda.gov/itp/policy/nafta/nafta.asp